Reese Witherspoon stars in Monsters vs AliensMICHAEL GOTTSCHALK
Even in a recession, movie theatre company Cineplex Galaxy Income Fund is raking it in. The owner-operator of 129 movies houses more than tripled its profit in the three months ended June 30. Here are some of the reasons the silver screen is golden:
Surprise blockbusters
Fast and Furious and Monsters vs. Aliens performed well in April, a month that traditionally has not featured strong releases, the company said. May had a string of hits: Star Trek, Up, X-Men Origins: Wolverine, Angels & Demons. The hits continued into the third quarter, which such movies as Julie & Julia and The Time Traveller's Wife.
Escapism
Cineplex says it sold 18.2 million tickets in the quarter, 2.6 million more than the year-earlier quarter.
"People love going to the movies for both entertainment and an escape," Cineplex chief executive officer Ellis Jacob said.
Sebastien Lavoie, an economist with Laurentian Bank and Montreal, says movies are a "relatively cheap way to have fun. [Moviegoers]want to forget that they may not have a job six months from now."
The Future is 3D
Cineplex has already outfitted 124 of its screens with the technology needed to show 3D movies, and has committed to extend the technology to a total of 175 screens. It's about more than a providing a thrilling experience for moviegoers - theatres charge a $3 premium for digital releases.
"Aside from 3D feature films, it is expected that alternative programming events such as sporting events and concerts will be broadcast in 3D in the near future, providing an exciting alternative for the cost conscious consumer," the company said.
3D now accounts for about 12 per cent of ticket sales, and the company expects it could eventually increase to 30 per cent.
"The third quarter of 2009 could be called the 3D quarter, with many of the year's 3D films being released during this time, including Ice Age: Dawn of the Dinosaurs . . . Final Destination, and ending the quarter for 3D is the animated feature Cloudy With a Chance of Meatballs," Mr. Jacob said.
Golden topping, please
The amount moviegoers spent on popcorn, soda and other concessions rose by 3 per cent to an average of $4.09 each, up from $3.97.
Snack-bar sales are a high-margin item. Total concession revenue rose by 19.7 per cent to $74.2-million, the company said.
The Staycationers
With fewer Canadians taking out-of-town vacations amid the economic slump, more families are treating the kids to the movies.
A recent poll conducted for The Canadian Press by Harris-Decima found that 61 per cent of vacationers were planning to spend their holiday close to home this summer.
Consumers are spending on other small luxuries as well. Anheuser-Busch InBev reported Tuesday that sales of its signature brands - such as Bud Lite, Harbon, Skol and Brahma - rose by 2.4 per cent in the quarter.
The details
In Canada, attendance revenue at Cineplex Galaxy Income Fund's theatres jumped by 16.2 per cent in the last three months to $18.2-million. Profit was 231 per cent higher than a year ago at $19.1-million.
The latest quarter was the company's best since its inception, said Mr. Jacob, Cineplex CEO.
"The catalysts behind our success this quarter include a strong film slate comprised of both traditional and 3D films, as well as the affordable escape that Cineplex delivers to our guests," he said.
Investors have loved the chain for the same reasons - so far this year, the company's units have matched the S&P/TSX's gains with a 20 per cent run higher. But unlike companies in the broader economy, it didn't suffer a steep fall when the markets tanked - it was setting new highs. Thursday, it was once again flirting with a 52-week high.
The units have come with a special bonus feature, just like many of the fund's movies - a yield of 7.9 per cent. Thursday, the fund declared quarterly cash distributions of 31.5 cents per unit, up from 31 cents per unit paid out in the same quarter the year before.
The seven analysts who follow the company's units think it still has a way to run - their average price target is $18.04. Five of them have "buy" ratings, two have "holds."